John Bull. "Lor' bless me, my dear Fella! I 'ad no idea you were so strong!"

Economic
strongman John Bull, the personification of Great Britain, whose cricket
bat reads "Bank of England" and dumbbell is labeled
"Manchester" and "Birmingham" (after Britain's
leading industrial cities), is astonished by Jonathan North's impressive
muscle in the guise of a $50 million loan. At the time of this
cartoon, the Union states were trying desperately to finance their
military effort in the American Civil War, and were hoping to induce
Great Britain and other European powers to grant loans to the United
States government. Here, the symbol of the Northern states (whose
name is adapted from Brother Jonathan, a precursor to Uncle Sam) reveals
the loan that American banks had grudgingly supplied to the federal
government. The show of muscle, however, was not enough to
convince the Europeans, who refused the American loan request.

The man
primarily responsible for putting the Union states on firm financial
footing was Treasury Secretary Salmon P. Chase, who formerly sat on the
board of several Ohio banks and served as the attorney for the
Cincinnati branch of the Bank of the United States. When he
assumed office in March 1861, the federal government had only $3 million
against a debt of $65 million, and the nation's credit had been
devastated by an economic depression in 1857-1858 and the secession
crisis of 1860-1861. The treasury secretary had the legal
authority to issue up to $40 million in government bonds and treasury
notes. With the onset of the war in April 1865, Chase initially
reacted with restraint, raising $16 million through the sale of bonds
and notes.

In late June, Chase held a strategy meeting with members of the
Senate Finance Committee and the House Ways and Means Committee, to whom
he distributed a draft of his upcoming report to Congress. The
treasury secretary estimated $318 million in military expenditures for
the fiscal year 1861-1862 (six times higher than the previous
year). He proposed raising $240 million through loans, $50 million in tax
increases, and the rest by tariffs and other means. Chase
requested congressional authority to finance a $100 million loan with
three-year treasury notes bearing a 7.3% annual rate of interest, plus a
$50 million loan (if necessary) with one-year notes at 3.65% interest
(exchangeable with the three-year notes). When Congress convened
in early July, Chase's requests were enacted without serious
debate. Congress also levied an income tax, which he had not
sought.

After the Battle of Bull Run
on July 21, 1861, Chase and
the rest of the country realized that the Civil War was not going to be
the brief conflict that most originally assumed. The Union retreat
at Bull Run undermined confidence in the Lincoln administration among
the already cautious bankers of the North. One financier, however,
was more far-sighted than most of the financial community at the
time. He was Jay Cooke, a 31-year-old banker in Philadelphia,
whose widespread advertisements marketed the federal government's
securities in small denominations ($50-$200) to the general
public. By June 1863, Cooke had sold over $320 million worth of
government bonds. The young banker turned down a chance to serve
as the assistant treasurer in Philadelphia, but did accept a position as
one of the subscription agents.

On August 11, 1861, Chase met in New York City with the nation's leading
bankers just as news arrived that much of Missouri had fallen under
Confederate control. Undeterred, the treasury secretary presented
his plan to raise $150 million in gold specie, an amount that
flabbergasted the bankers. Chase proposed that the banks buy the
one- to three-year, 7.3% treasury notes for gold. The bank gold
reserves would then be replenished through resale of the notes to the
public and the government's payment of military expenses. The
banks only had $63 million in gold reserves on hand, but Chase would not budge.Feeling pressured to accept the loan, the bankers agreed to make
three $50 million installment payments (the first is symbolized in the
cartoon).

Using Cooke's marketing tactics, Chase distributed an "Appeal on
Behalf of the National Loan" to inspire patriotic participation in
the bond sales, and wrote personal notes to editors across the North,
urging them to endorse the national loan. Cooke placed
advertisements and favorable editorials in many of Pennsylvania's
newspapers, and was taking in $100,000 a day by early September.
The gold reserves of most banks, however, were not being replaced as
quickly as hoped (due largely to red tape in military appropriations),
but Chase cajoled them to make the second $50 million installment
payment of gold specie in late September. The importance of the
national loan was magnified a month later when Chase received word from
his special envoy, August Belmont, that British and French
bankers emphatically refused to issue loans to the United States
government.